From April 2026 small businesses, sole traders and landlords will need to change how they report income tax to HMRC. New legislation, known as Making Tax Digital for Income Tax (MTD for IT) is set to be introduced which will see a change in financial requirements.
To comply with MTD for IT requirements, businesses will need to do the following:
Send quarterly updates on business income and expenses.
Keep digital records.
Submit returns annually using MTD compatible software.
The MTD for IT roll out will happen in phases. Anyone with a turnover of over £50,000 for the tax year 24/25 will need to start complying from April 2026. It will then extend to those earning over £30,000 from April 2027 and anyone earning over £20,000 from April 2028.
These deadlines may feel a while away yet but it is a good idea to start getting ready now and building habits that will make the transition easier. Test out digital tools such as Xero Simple so you can get the hang of it in advance and start capturing receipts instantly and doing daily reconciliations. Having a good bookkeeping routine where your data is up to date will set you up for when the legislation comes into effect.
